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Merit review WC022/18

Findings on review

The following finding is made by the State Insurance Regulatory Authority (“the Authority”) on review and is to be the basis for the Insurer’s review decision.

The amount of the worker’s pre-injury average weekly earnings (“PIAWE”) is:

$2,212.54 per week (first 52 weeks)

$2,154.67 per week (after 52 weeks)

Recommendation based on findings

The following recommendation made by the Authority is binding on the Insurer and must be given effect to by the Insurer in accordance with section 44(3)(g) of the Workers Compensation Act 1987 (“the 1987 Act”).

The Insurer is to determine the worker’s entitlement to weekly payments of compensation and pay the difference to what they have been paid and what they are entitled to be paid in accordance with the finding of their PIAWE above.

Background

The worker sustained an injury while working for their pre-injury employer. The accepted date of injury is in December 2017.

In February 2018, the Insurer made a work capacity decision which determined the worker’s PIAWE to be $829.16 per week

The worker applied for a review of the calculation of their PIAWE. The Insurer conducted the review in April 2018 and determined the worker’s PIAWE to be $885.00 per week.

The Authority received the application for merit review in April 2018. I am satisfied the application was made within 30 days, as is required under section 44BB(3)(a) of the 1987 Act.

Legislation and guidelines

The legislative framework governing work capacity decisions and reviews is contained in the:

Section 44BB of the 1987 Act provides for merit review of a work capacity decision of the Insurer, by the Authority.

Submissions

In the application for merit review, the worker submits:

The Insurer assessed PIAWE using the tax return 1/7/2016 to 30/6/2017 however their earnings were considerably more after this period and at the time of the injury.

In its calculation of the worker’s PIAWE, the Insurer did not wait for the Independent Contractor Agreement (“the Agreement”) provided by the pre-injury employer and disregarded supporting information such as invoices paid and bank statements.

In reply, the Insurer maintains its decision on internal review dated April 2018 and refers to the reasons provided in that decision.

In addition, the Insurer states the worker and their pre-injury employer were contacted and requested to provide any further documentation. However, no Agreement was provided before the internal review was conducted.

Information considered

The documents I have considered are those listed in, and attached to, the application and the Insurer’s reply.

I also have a copy of the Agreement dated August 2017, referred to by the parties in their submissions, an email from the worker dated May 2018 along with a Statutory Declaration sworn on May 2018.

Reasons

Nature of merit review

This matter involves a merit review of the work capacity decision/s of the Insurer in accordance with section 44BB(1)(b) of the 1987 Act.

The review is not a review of the Insurer’s procedures in making the work capacity decision and/or internal review decision. The review requires that I consider all of the information before me substantively on its merits and make findings that, in light of the information before me, are most correct and preferable.

Pre-injury average weekly earnings (PIAWE)

I note that the Insurer used the worker’s personal tax return for the period of 1 July 2016 to 30 June 2017 to calculate the worker’s PIAWE. I am not of the view that this is the most appropriate way of calculating the worker’s PIAWE based on the information before me.

This is because the individual tax return covers a period that is outside of the relevant period as found by me below and indeed, as found by the Insurer in its submissions in reply. Further, in an email to the Authority dated May 2018, the worker states that their income for the year ended 30 June 2017 was less as they had not worked a full year.

It is therefore preferable to refer to information regarding the worker’s earnings during the relevant period. This comprises of:

Weekly invoices issued by the worker to their pre-injury employer

1-page summary of total payments made by the pre-injury employer to the worker

Account statement of the worker from their bank account

Independent Contractor Agreement

I acknowledge the Insurer’s submission that the information regarding the worker’s earnings are somewhat confusing, given that the amounts deposited into their bank account do not correspond with the invoiced amounts. By way of explanation, the worker states that they “were paid an estimate of $4,000 per pay until a monetary agreement was made, therefore adjustments were made after that agreement”. I accept the worker’s explanation.

In any event, I do not propose to use the bank account statement as a more reliable indicator of the worker’s earnings are contained in their invoices which largely correspond with the 1-page summary of total payments made by the pre-injury employer to the worker. The worker states that the payments were verified by the pre-injury employer as evidenced by the signature of the pre-injury employer at the bottom of the document. The rates of pay are explained in the Agreement.

I note that the worker was engaged by the pre-injury employer as a contractor and the provisions of the Agreement clearly state that there was no employer/employee relationship. However, as the Insurer has accepted liability for the worker’s injury, their PIAWE will be calculated using the provisions of the 1987 Act.

The legislation surrounding the calculation of a worker’s PIAWE are set out and discussed below.

“Pre-injury average weekly earnings” is defined by section 44C(1) of the 1987 Act as:

(1) In this Division, pre-injury average weekly earnings, in respect of a relevant period in relation to a worker, means the sum of:

(a) the average of the worker’s ordinary earnings during the relevant period (excluding any week during which the worker did not actually work and was not on paid leave) expressed as a weekly sum, and

(b) any overtime and shift allowance payment that is permitted to be included under this section (but only for the purposes of the calculation of weekly payments payable in the first 52 weeks for which weekly payments are payable).

The “relevant period” is defined by section 44D(1) of the 1987 Act:

(1) Subject to this section, a reference to the relevant period in relation to pre-injury average weekly earnings of a worker is a reference to:

(a) in the case of a worker who has been continuously employed by the same employer for the period of 52 weeks immediately before the injury, that period of 52 weeks, or

(b) in the case of a worker who has been continuously employed by the same employer for less than 52 weeks immediately before the injury, the period of continuous employment by that employer.

“Ordinary earnings” are defined by section 44E of the 1987 Act as:

(1) Subject to this section, in relation to pre-injury average weekly earnings, the ordinary earnings of a worker in relation to a week during the relevant period are:

(a) if the worker’s base rate of pay is calculated on the basis of ordinary hours worked, the sum of the following amounts:

(i) the worker’s earnings calculated at that rate for ordinary hours in that week during which the worker worked or was on paid leave,

(ii) amounts paid or payable as piece rates or commissions in respect of that week,

(iii) the monetary value of non-pecuniary benefits provided in respect of that week, or

(b) in any other case, the sum of the following amounts:

(i) the actual earnings paid or payable to the worker in respect of that week,

(ii) amounts paid or payable as piece rates or commissions in respect of that week,

(iii) the monetary value of non-pecuniary benefits provided in respect of that week.

(2) A reference to ordinary earnings does not include a reference to any employer superannuation contribution.

“Base rate of pay” is defined by section 44G of the 1987 Act as:

(1) In relation to pre-injury average weekly earnings and current weekly earnings, a reference to a base rate of pay is a reference to the rate of pay payable to a worker for his or her ordinary hours of work but does not include any of the following amounts (referred to in this Division as base rate of pay exclusions ):

(a) incentive based payments or bonuses,

(b) loadings,

(c) monetary allowances,

(d) piece rates or commissions,

(e) overtime or shift allowances,

(f) any separately identifiable amount not referred to in paragraphs (a) to (e).

The Agreement states that the worker commenced working for the pre-injury employer as a contractor in August 2017 however the invoices from the worker indicate that they commenced in August 2017. I find the relevant period to be XX August 2017 to XX December 2017, being the day before the injury.

The worker’s invoices for the relevant period indicate different rates of pay which are dependent on a number of factors:

whether the shift is day or night/weekend

a negotiated increase in the rate of pay from 23/11/2017.

I note that before 29/9/2017, the worker received an hourly rate of $60.00 for day work which increased to $70.00 for night/weekend work. From the Agreement, it appears these rates were paid on the basis that the worker had workers compensation insurance.

I consider workers compensation insurance to be an operation cost of the worker’s business and this component of the payments made by the pre-injury employer cannot be included in the worker’s ordinary earnings. As per the Agreement, the workers compensation insurance component amounted to $15.00 per hour.

In addition, superannuation amounted to $4.00 per hour which was “built into the hourly rate” according to the Agreement. As superannuation contributions do not form part of the worker’s ordinary earnings, this amount will also be deducted from the worker’s base rate of pay – see section 44E(2) of the 1987 Act.

Accordingly, the removal of the workers compensation insurance component of $15.00 and the superannuation component of $4.00 results in an hourly rate of $41.00 per hour (Mon-Fri) (0600-1800) which increases to $51.00 per hour (night shift and weekend) from 10/8/2017 to 22/11/2017.

From 23/11/2017, the hourly rate increased to $46.00 per hour (Mon-Fri) (0600-1800) and $56.00 per hour (night shift and weekend).

GST is also excluded from the worker’s earnings as GST only applies to services provided by the worker’s company. It is not a tax that is levied on the worker’s personal earnings. Further, as they are the sole employee of their company and is not currently working (thereby not providing any services), their company would not be required to pay any GST.

The below table sets out the amounts that I consider to be the worker’s ordinary earnings on a week by week basis for the relevant period.

Table 1

Week #

Week ending

Hours worked and hourly rate of pay

Total (first 52 weeks)

Total (after 52 weeks)

1 (8 days)

17/8/2017

31.5 x $4120.0 x $51

$2,311.50

$2,111.50

2

24/8/2017

51.5 x $41

$2,111.50

$2,111.50

3

31/8/2017

62.0 x $418.0 x $51

$2,950.00

$2,870.00

4

7/9/2017

52.0 x $416.0 x $51

$2,438.00

$2,378.00

5

13/9/2017

48.0 x $41

$1,968.00

$1,968.00

6

20/9/2017

54.5 x $41

$2,234.50

$2,234.50

7

28/9/2017

52.5 x $41

$2,152.50

$2,152.50

8

6/10/2017

14.0 x $41

$574.00

$574.00

9

12/10/2017

52.5 x $41

$2,152.00

$2,152.00

10

18/10/2017

52.5 x $41

$2,152.00

$2,152.00

11

25/10/2017

47.5 x $4110.5 x $51

$2,483.00

$2,378.00

12

2/11/2017

32.0 x $41

$1,312.00

$1,312.00

13

9/11/2017

54.0 x $4112.0 x $51

$2,826.00

$2,706.00

14

16/11/2017

40.5 x $41

$1,660.50

$1,660.50

15

23/11/2017

52.0 x $4622.5 x $56

$3,652.00

$3,427.00

16

29/11/0217

53.5 X $4611.5 x $56

$3,105.00

$2,990.00

17

7/12/2017

32.0 x $4612.0 x $56

$2,144.00

$2,024.00

18 (2 days)

11/12/2017

21.0 x $46

$966.00

$966.00

TOTAL

$39,193.50

$38,168.50

Shift allowance payments for the worker’s night/weekend shifts (+$10 per hour) are allowed for the first 52 weeks for which weekly payments are payable - see section 44C(1)(b).

The relevant period is 10 August 2017 to 11 December 2017, a period of 124 days. As there are 7 days to a week, 124 is divided by 7 which equals 17.714285.

I therefore calculate the worker’s PIAWE as follows:

$39,193.50 / 17.714285 weeks = $2,212.54 per week (first 52 weeks)

$38,168.50 / 17.714285 weeks = $2,154.67 per week (after 52 weeks)

Merit ReviewerMerit Review ServiceDelegate of the State Insurance Regulatory Authority